China blocks US sanctions on five 'teapot' refineries over Iran oil trade

China has issued an order to block US sanctions imposed on five of its independent oil refiners accused of purchasing crude from Iran, escalating tensions between Beijing and Washington over energy trade and international law.

In a statement today (3 May), China's Ministry of Commerce said the US measures "improperly" restrict trade between Chinese firms and third countries, calling them a violation of international law and basic norms of international relations, reports Al Jazeera.

The ministry announced a "prohibition order" stating that the sanctions "shall not be recognised, enforced, or complied with," describing the move as necessary to safeguard China's sovereignty, security and development interests.

The order applies to Hengli Petrochemical (Dalian) Refinery and four other so-called "teapot" refiners – Shandong Jincheng Petrochemical Group, Hebei Xinhai Chemical Group, Shouguang Luqing Petrochemical and Shandong Shengxing Chemical.

The US Department of the Treasury announced the sanctions on 24 April, identifying Hengli as "one of Tehran's most valued customers" and alleging that it had generated hundreds of millions of dollars in revenue for the Iranian military through crude oil purchases.

The Trump administration had also sanctioned the other four refiners previously as part of efforts to curb Iran's oil revenues.

China, however, reiterated its long-standing opposition to unilateral sanctions that lack United Nations authorisation, insisting that such measures should not be enforced within its jurisdiction.

Energy trade remains central to the dispute. China imports more than half of its oil from the Middle East, with Iran accounting for a significant share. According to commodities analytics firm Kpler, China purchased over 80% of Iran's oil exports in 2025.

The targeted refiners belong to China's network of independent processors, commonly known as "teapot" refineries. Smaller than state-owned giants, these operators play a crucial role in securing China's energy supply by sourcing heavily discounted crude from sanctioned producers such as Iran, Russia and Venezuela.

Despite accounting for roughly a quarter of China's refining capacity, teapot refineries often operate on thin – and sometimes negative – margins. They have also been under pressure from weak domestic demand in recent months.

US sanctions have further complicated their operations, creating hurdles in sourcing crude and marketing refined products, including challenges in declaring the correct origin of fuel exports.